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Analysis

Top-earning Nonprofit Hospitals Shortchange Charity Care

By John Commins  
   February 18, 2020

Study finds nonprofit hospitals with thicker bottom lines gave disproportionately lower levels of charity care.

The nation's top-earning nonprofit hospitals doled out less charity care than lower-earning hospitals did, relative to their respective profits, according to a new study from Johns Hopkins University.   

In the research letter, published this week in JAMA Internal Medicine, Ge Bai, an associate professor at Johns Hopkins Carey Business School, examined 2017 Medicare cost reports from the Centers for Medicare and Medicaid Services for 2, 563 acute-care hospitals.

For every $100 of net income, hospitals in the top-earning quartile gave $11.5 of charity care to uninsured patients and $5.1 to insured patients.

Hospitals in the lower, third quartile of income gave considerably more – $72.3 to the uninsured and $40.9 to the insured.

"For both insured and uninsured patients, non-profit hospitals with superior financial performance provided disproportionately low levels of charity care," the researchers concluded.

"Nonprofit hospitals with substantial financial strength should consider more generous financial assistance eligibility criteria to reduce the financial risk exposure of disadvantaged uninsured and underinsured patients."

The top 1% of high-earning hospitals generated 23% of the net income of all nonprofit hospitals and provided 7% (to the uninsured) and 5% (insured) of the charity care at all nonprofit hospitals.

"The highest-earning hospitals have done very well financially," Bai said in comments accompanying the study. "The top 1% made more than $10 billion profit, and the top 5% more than $25 billion. Yes, they take certain measures to help financially disadvantaged patients, but they’re positioned to do more."

The 640 top-earning hospitals generated nearly $48 billion in net income in 2017 – or slightly over 100% of all net income reported by the 2,563 hospitals. The bottom three quartiles of hospitals reported negative net income.

Study co-author Gerard Anderson, of the Johns Hopkins Bloomberg School of Public Health, said the research letter breaks new ground by examining charity care across hospitals' financial state, and detailing distinctions between charity care for insured and uninsured patients.

"Congress and state legislatures need to take a careful look at the proper balance between the hospitals' profits and their level of charity care. Too many very profitable nonprofit hospitals are providing little charity care," Anderson said.

The study also found that hospitals in states that expanded Medicaid under the Affordable Care Act gave less charity care than hospitals in other states did – $12 versus $37.8 for uninsured patients, and $8.7 versus $11 for insured patients, measured against every $100 of net income.

"Nonprofit hospitals have full discretion in designing their financial assistance policy," Bai said.

"The top-earning hospitals, which have substantial financial strength, should design more generous eligibility criteria to help uninsured and underinsured patients. The hospitals' nonprofit status and tax exemptions require such action," she said.  

“The highest-earning hospitals have done very well financially. Yes, they take certain measures to help financially disadvantaged patients, but they’re positioned to do more.”

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.


KEY TAKEAWAYS

For every $100 of net income, hospitals in the top-earning quartile gave $11.5 of charity care to uninsured patients and $5.1 to insured patients.

Hospitals in the lower, third quartile of income gave $72.3 to the uninsured and $40.9 to the insured.

The 640 top-earning hospitals generated $48 billion in net income in 2017 – slightly more than 100% of all net income reported by 2,563 hospitals.

The bottom three quartiles of hospitals reported negative net income.


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